Bill could make local income-tax filings mandatory for Ohioans

TNS Regional News
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May 23, 2014 at 7:07 PM

What may look like a simple tax-reporting requirement could cause significant complications for cities and require hundreds of thousands of Ohio taxpayers to start filing municipal income-tax returns, municipal officials said of an off-year budget provision that passed the Ohio Senate on Wednesday.

But Senate President Keith Faber said cities are just trying to avoid getting into issues regarding streamlining and efficiency in tax collection.

“They don’t want to point out that a disproportionately large percentage of their revenue comes from people who don’t get to vote on their tax issues,” he said. “That is a burning issue in Ohio. It doesn’t get resolved by cities burying their heads in the sand.”

As part of a large package of changes to House Bill 483, the so-called mid-biennial review, Senate Republicans would require the 592 cities and villages in Ohio that levy an income tax to report to the state a breakdown of revenue generated by resident versus nonresident taxpayers.

The Ohio Municipal League says cities and villages currently do not separate that data, and doing so presents a host of issues.

To produce accurate data, municipalities would have to impose mandatory filing for all taxpayers, regardless of whether they have any tax obligation to the city, said the Municipal League’s Kent Scarrett. About two-thirds of cities already require it, he said, but among those that do not are Columbus, Dayton and Cincinnati.

“You’re talking about hundreds of thousands of taxpayers who don’t have any requirement to interface with the municipal income tax (who) would now be forced to, whether they have a tax obligation or not,” Scarrett said.

The provision would add more burdens to trimmed-down municipal staffs and would require many cities to purchase or upgrade software, Scarrett said.

Melinda Frank, Columbus city tax administrator, said the city has about 21,000 employers and more than half do not file electronically. She said W-2 forms for those workers would have to be entered individually by the city under the proposal.

In addition, she said, cities would have to track down data on the thousands of partners that can be involved in real-estate investment partnerships. She said there also are questions about how to count university students.

“That language was inserted without actually having sufficient knowledge about the circumstances that surround tracking resident and nonresident earnings,” Frank said. “At this point, I don’t think the city of Columbus would be capable of generating such a report.”

Faber noted that a Municipal League letter yesterday said that often more than 70 percent of municipal income taxes come from nonresident workers.

“How do they know that if they don’t already have that data?” he said. “You mean they can’t tell by the address that someone sends their tax return in where they live?”

Breaking down tax data into residents versus nonresidents is important to show the need to make tax compliance as easy as possible, Faber said. A separate bill that seeks to do that, House Bill 5, is pending in the Senate.

The Regional Income Tax Agency handles income-tax collections for 237 Ohio municipalities, including most in Franklin County. Bob Meaker, chief of tax operations, said his members already have mandatory filing for all taxpayers.

But collecting the data called for in the bill “is probably not as easy as it would seem to be,” he said.